Deutsche Bank Forecasts Naira Gains Amid Economic Recovery

Deutsche Bank has added the naira to its frontier foreign exchange monitor, predicting further appreciation against the dollar as Nigeria's external position improves. The bank cites the naira's undervaluation and relatively high real interest rates as key factors that could attract foreign capital.

In September, the naira appreciated from N1,335.50 per dollar at the end of August to N1,329.50 per dollar, indicating a N6 improvement. This appreciation has increased returns on Nigerian assets, drawing international investor interest.

The bank also notes that Nigeria's oil revenues, bolstered by higher crude oil prices, support this positive outlook. However, Deutsche Bank warns that fiscal pressures, particularly increased government spending ahead of Nigeria's January elections, could threaten the currency's gains.

Taiwo Oyedele, Nigeria's Minister of Finance and Coordinating Minister, cautioned that restoring petrol subsidies could negatively impact the naira, indicating that even a hint of policy reversal could unsettle financial markets.